Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Fiskars Oyj (FKRAF, Financial) reported an all-time high gross margin in Q3, driven by improvements in the supply chain.
- The company maintained its guidance for 2024, expecting comparable EBIT to be slightly above 2023 levels.
- Fiskars Oyj (FKRAF) achieved a 6.1% increase in reported net sales for Q3, including contributions from Georg Jensen.
- The strategic decision to separate business areas into two operationally independent companies aims to enhance speed and impact.
- The company has successfully implemented cost-saving measures, delivering over EUR30 million in EBIT improvements.
Negative Points
- Despite profitability improvements, Fiskars Oyj (FKRAF) experienced a decrease in organic sales by 7.3% in Q3.
- Free cash flow was negative at EUR16.9 million due to the phasing of trade payables.
- The US market, a significant region for Fiskars Oyj (FKRAF), showed a decline in sales due to low consumer confidence.
- Inventory levels were higher year-over-year, indicating potential inefficiencies in inventory management.
- The company's net debt to EBITDA ratio increased to 2.8 times, above the target of 2.5 or lower.
Q & A Highlights
Q: You're separating business areas into independent operations. Should we read this as higher P&L responsibilities within the current business areas? Is business development run independently going forward?
A: Yes, business development for Fiskars and Vita is independent in their own companies driven by their own CEOs. We focus on portfolio management and fund allocation to drive growth in both Vita and Fiskars.
Q: Given that Fiskars and Vita are already quite independent, what will be the practical change in the plan announced today? Will they build separate logistics and warehouses, for example?
A: We will not separate logistics but will allow Vita or Fiskars to sell services to the sister company. This avoids unnecessary dis-synergies, allowing each business to decide if they want to buy services from the other.
Q: How will the organization change enable EUR12 million cost cuts, given there was little overlap to begin with, with Fiskars and Vita?
A: The cost savings come from simplifying operations and focusing on what each brand needs to grow. By de-averaging operations, we find savings tailored to the distinct needs of Fiskars and Vita.
Q: Inventories were up year over year. What is the reason for higher inventories?
A: The increase is partly a natural bounce back from last year's significant inventory cuts. We continue to drive down inventory levels over the long term.
Q: Why did sales in the US deteriorate sequentially in Q3?
A: For Fiskars, big box players in the US have weaker outlooks due to consumer behavior in the DIY segment. For Vita, luxury department stores see reduced traffic and consumer sentiment in our product categories.
Q: You stated that M&A is now part of the toolbox. Does this mean your view and appetite for M&A has changed?
A: Our approach remains systematic. We aim to reach our net debt/EBITDA target before pursuing M&A opportunities, ensuring we identify and acquire the right targets without rushing.
Q: Can you give an update on Georg Jensen synergies? What's your run rate with Georg Jensen synergies at end Q3 and what is expected by end of 2024?
A: 75% of the EUR18 million cost-out synergies are in implementation. Many are volume-driven, so full realization depends on achieving those volumes. IT integration is the main remaining task.
Q: How much visibility do you have for Q4 and what kind of consumer market do you envision for the important Q4 season?
A: Q4 is heavily dependent on Black Friday, which influences replenishment for Christmas. For Vita, consumer sentiment will impact direct-to-consumer sales. In China, the double 11 event and preparations for Chinese New Year are key.
Q: How much net cost savings potential from profit improvement measures do you have left when taking into account wage inflation?
A: Year-to-date savings are over EUR30 million. SG&A savings are stabilizing, but supply chain savings are expected to continue delivering improvements in Q4 and into 2025.
Q: The other segment EBIT loss was small in Q3. Will we see an uptick in Q4?
A: The guidance for this segment remains a negative EBITDA of EUR1 million to EUR1.5 million per month. The Q3 result included some other operating income expected in Q4, but overall guidance holds.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
